Small and medium sized businesses (SMB) often struggle to find affordable financing options. Existing solutions are often hard to obtain and may incur significant borrowing costs to SMBs. Financial solutions offered by various financial institutions typically carry effective annual percentage rates (APR) of 10% to 70%, or even higher APRs. Many of the financial institutions offering financial solutions may require payment of additional fees (e.g., account fees), even if a financial solution is not being utilized by an SMB. The financing problem for SMBs may be magnified, as large companies often use market power and market influences to push out the payment terms that they offer to their suppliers. When payment terms are extended, suppliers may be forced to seek and find additional financing to cover the supplier's expenses for payment terms that have become extended, often to a significant degree.
There exists financial solutions for SMBs to obtain financing for their business. Some examples of existing financial solutions include factoring of invoices, financial tech (FinTech) lenders, and supply chain finance. Factoring of invoices (also known as factoring) is a financial transaction and a type of debtor finance when a business sells its accounts receivable (e.g., invoices) to a third party, often at a discount. One significant downside of factoring of invoices products is that such products generally require factoring all invoices for a significant period of time, often one to three years. FinTech lenders are companies that focus on lending financing to companies, often startup companies. Some FinTech lenders focus on the SMB space, and typically offer loans with APRs of 25-99%. Often, additional fees and restrictions exist with these loans. Supply chain finance (SCF) is a product similar to FinTech lenders, and often provides attractive pricing, but generally has more limited availability for SMBs. One downside of supply chain finance is that SMBs often need to log into each SCF system separately in order to check invoices that are available for financing.